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Enemy Property and Taxation: Supreme Court’s Judgment – A Detailed Analysis

The Supreme Court's Judgment on Enemy Property and Taxation: A Detailed Analysis


The case under consideration involved a contentious dispute over the taxation of “enemy property” in India. The appellants, Lucknow Nagar Nigam & Others, contested a decision by the High Court of Allahabad that favored the respondents, Kohli Brothers Colour Lab. Pvt. Ltd. & Others, regarding the exemption of property tax on enemy property. The recent judgment by the Supreme Court of India regarding the taxation of enemy property has brought much-needed clarity to a complex legal issue. This comprehensive analysis delves into the background of the case, the key legal questions raised, and the meticulous reasoning employed by the Supreme Court, shedding light on its significant implications for the taxation of enemy properties in the country.

Parties and Legal Representation

The legal battle featured the Lucknow Municipal Corporation squaring off against Kohli Brothers Colour Lab Pvt. Ltd. & Others, with Justice Nagarathna delivering the detailed judgment. The courtroom witnessed intense arguments from distinguished legal practitioners, including Sri Kavin Gulati for the appellants and Sri Guru Krishna Kumar, Sri Rupesh Kumar, and Learned ASG Sri Balbir Singh, representing the respondents.

The Factual Background

Central to the dispute was a property in Lucknow labeled as “enemy property” due to the migration of its original owner to Pakistan in 1947. The Custodian of Enemy Property for India, under the Ministry of Commerce, managed the property, sparking a controversy over its taxation by the Lucknow Nagar Nigam.

Legal Questions and Controversy

The heart of the matter rested on whether the statutory vesting of enemy property in the Custodian amounted to a transfer of ownership, rendering such property as “Union property” and exempt from local taxation under the UP Municipal Corporation Adhiniyam, 1959.

The Court’s Analysis and Conclusion on Enemy Property Taxation

The Supreme Court conducted a meticulous analysis of the legislation, including the Enemy Property Act of 1968, its amendments, and relevant constitutional provisions. The focal point of the judgment was the interpretation of the term “vesting” and whether it bestowed ownership of such properties upon the Union of India or merely designated the Custodian as a trustee for management purposes.

Ownership and Custodianship

The Court conclusively ruled that the Custodian operates as a trustee, not an owner, of enemy property. This distinction is pivotal, signifying that the property does not automatically become “Union property” upon its vesting in the Custodian.

Taxation Implications of Enemy Property

Based on this interpretation, the Court held that enemy properties are not exempt from local taxation under Article 285 of the Constitution. This directly impacted the Lucknow Nagar Nigam’s authority to levy property tax on such properties.

Key Paragraphs from the Judgment

Several key paragraphs from the judgment provide deep insights into the legal rationale. One such excerpt (Page 140 of the Judgment) explicitly states, “The enemy property vested in the Custodian shall not… continue to remain, save as otherwise provided in this Act, vested in the Custodian.” This underlines the Court’s stance that the vesting of such property in the Custodian does not confer ownership upon the Union of India.

Implications for Future Taxation of Enemy Property

The judgment serves as a beacon, clarifying that, starting from the fiscal year 2024-2025 onwards, local authorities have the right to levy and collect property taxes on enemy properties. This sets a crucial precedent for the taxation of such properties across India.

Conclusion: Supreme Court’s Ruling on Enemy Property Taxation

In conclusion, the Supreme Court’s judgment offers a definitive interpretation of the legal status of enemy properties in India. By distinguishing between custodianship and ownership and elucidating the applicability of local taxes, this landmark decision not only resolves a longstanding dispute but also establishes a clear legal precedent for their management and taxation. The judgment strikes a delicate balance, safeguarding the interests of the Union, local authorities, and occupiers, thereby contributing to the evolving jurisprudence surrounding this matter in India



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